Rhapsody Buys Napster

(UPDATED) Rhapsody has bought Napster from Best Buy, joining two of the most established and largest streaming  music services in the U.S.  Under the agreement, Rhapsody will acquire Napster subscribers and certain other assets; and Best Buy will receive a minority stake in Rhapsody. The transaction is expected to close by the end of November.

The move comes as competitors like Spotify, MOG and Rdio are gaining real traction with a freemium model that Napster and Rhapsody have resisted beyond limited free trials.  Early stats from last week's F8 music announcement show that Facebook will accelerate that growth. Spotify saw its own user jump from 3.5 to 5.3 million in the week after F8.

It's bit of a failure for Best Buys digital strategy, but for Rhapsody it's about aquiring existing subscribers. "This is a 'go big or go home' business, so our focus is on sustainably growing the company," according to Rhapsody CEO Jon Irwin. Hinting that more acquisitions are possible, "There's substantial value in bringing Napster's subscribers and robust IP portfolio to Rhapsody as we execute on our strategy to expand our business via direct acquisition of members and distribution deals."